23 comments:

We are putting our house on the market in about two weeks due to a job transfer.

We've already had to emotionally deal with the fact that, if we're lucky, we'll probably sell our house for about 60k less than we paid for it 6 years ago.

I have a friend whose husband lives in an efficiency and works in another state while she and the kids still live in their house up here because they are just so, so underwater.

My husband and I were talking about how lucky we are that we aren't underwater, we don't have to bring a huge check to the table in order to close, and that gives us so much more flexibility in being able to take the job transfer instead of being laid off.

Of course, upon further thought, we realized that we really *are* underwater, it's just that we brought our large check to the table six years ago when we bought our house with a particularly large down payment.

Housing in our neck of the woods (suburban East S.F. Bay Area) is pretty much back up to where it was when we purchased at the end of 2009, after it had dropped ~15%. But it's still almost 30% off the peak in '06. We didn't time the bottom very well, but we really needed the space after having a 3rd child.

My parents downsized in '06 and while the smaller house they bought is worth less than what they paid, the bigger one they sold at the top of the market has lost a higher percentage of its value.

Agree with Crimson Wife. For us, the market is flat to up a bit (and in our immediate neighborhood, things do sell quickly). A neighbor who bought when we did, but got a short sale and a house filled with trash, just sold and made a tidy profit, but if we sold, we'd lose a little bit after commission (because they never remind you that you need ~7% increase to actually break even after transfer taxes and 6% commission!)

But from the peak, things are still down a lot, nearly 40%, and if you bought at the peak, you would still lose a lot.

Sigh. I wish. Well not really, I just wish homes were flying off the market everywhere.

Where I live, home prices are astronomical and there is very little inventory. I don't know if they've regained their peak prices yet, but I hope they don't go higher anytime soon.

Where I own a house, on the other hand, home prices were sinking throughout last year, despite lower inventory. I sincerely hope that our house there sells before too many more houses come on the market this spring. I'm not even going to think about the money already lost. (This despite starting at a price lower than any agent, appraisal, or Zillow estimate.)

Zillow claims that our zipcode is still down 22% from the peak in Oct 2005, but I'm not sure I believe them, either about the current prices or about when the peak occurred. Their estimates tend to be much more volatile than the actual real estate market.

We have averaged about 2.5% inflation over the last 5 years, so a house that has not changed in sticker price has lost 12.5% of its value. An increase of 5.5% makes back only half of the loss to inflation alone and does not begin to account for the loss during the downturn.

One thing to bear in mind is that someone who doesn't own a house is most likely paying rent. Rents are way up, to the point where we could now actually rent out our home for more than what we're paying on our re-fi'd mortgage. I wish we had timed the bottom a bit better but I wouldn't want to be renting right now.

Rents only go up if you're renting in high turnover areas. We've been renting a (now) 10 year old home for almost 5 years. It's 4400 sq feet in the foothills of Fort Collins. The landlords had to move to Palo Alto for work when the market was at the bottom here (not that we had much fluctuation) and they are thrilled to have a family here long-term. Rent hasn't changed in 5 years and it is $500 a month less than the home in Phoenix we lived in that was half the size.

Now if you life 2 miles away, near the university, rent are different.

We rent because my husband was in real estate in Phoenix during the bubble. He KNEW the high home prices were unsustainable and cashed us out right around the peak. We love renting homes now! One more year (kid off to college) and we can downsize and live in a downtown area. Who's going to mow this place when the boys go to college?

I want their system, which is based on forced savings (as I understand it).

I'm pretty sure the beauty of forced savings, as opposed to cheap credit (our system prior to the crash), isn't just that people have very large savings accounts compared to their counterparts in other countries.

It's that when everyone is required by law to save the same amount of money (as a base), prices are somewhat constrained. I ***assume*** you don't see the same fantastic run-up in prices for necessities like housing & healthcare in a forced-saving system that you do in a credit system.

At least, that's the way it seems to me. I haven't thought it through...

BUT I feel I do know enough about Singapore's system to be keen on forced savings.

Houston hasn't bubbled or busted recently, either, not since the oil bust of the 1980s.

Our temperate climate (I'm wearing shorts today) and diverse, thriving job market (we're not just oil and gas anymore) are causing a huge population boom. People are flocking from everywhere, particularly California, and anywhere else where they keep reading how Houston has all these jobs and cheap housing. The 10-county Houston MSA is gaining about 3.5%, or 200,000 people, every year.

Housing prices don't rise much year to year, primarily because of a few factors:1) We have no state income tax, so we have a fairly high property tax. It's about 3% of the appraised value, where the appraised value is what the county thinks you could sell it for. For example, on a $250K house you'd be paying $7500 in property taxes annually. For people coming from states where they are used to paying a few hundred dollars in property tax, that can be a real shocker.2) This area has nearly infinite room for growth. The land is flat, and the nearest natural boundary is the Gulf of Mexico 50+ miles away from the city center. This means that the developers keep building new suburbs further and further out.3) There is no practical public transportation from the suburbs, so those people buying houses 40 miles from the center of town will have to drive to work. This is why the first response to "where in Houston should I buy?" is "what side of town is your job on?"

Important fact: Houston has NO ZONING. It is the largest city in the US without zoning. I do not live in a master-planned community, but in an older neighborhood, which means that on my street there are a games shop, a hair salon, a five-unit apartment complex, and about 20 single-family houses, and I can turn my property into a parking lot or an auto-body shop or a massage parlor if I so desire. (But I can't keep chickens; it's against city ordinances.)

Prices in the suburbs here are much flatter than prices in the older, inner parts of town, which are all experiencing "revitalization". A typical suburban 3300 sf house on a 9000 sf lot with a walk score of 30, bought in 1998 for $190K ($59/sf), would sell today for about $270K ($84/sf, 2.4% annual increase). This house would be 25 miles from the city center, with a driving commute of 30 minutes at midnight or 60 minutes during an hour when you'd actually be driving to or from work, assuming there are no wrecks on the highway that would double your transit time.

A typical new inner-loop (1-2 miles from city center) 3000 sf townhome on a 2500 sf lot with a walk score of 85 might sell for $600K ($200/sf). A 90-year-old inner-loop 1400 sf bungalow on a 5000 sf lot with a walk score of 90 might sell for $450K ($300/sf), up from $240K ($171/sf) 15 years ago (4.3% annual increase).

I could probably sell my house for lot value at a 5% annual increase over what I bought it for 20 years ago, and that's in one of the hottest areas in town. So even the hottest areas here haven't boomed like other places boomed, but at least we haven't busted either.

If you're coming to Houston, buy a place to live in, not as an investment. Don't expect to get any gain out of it when you sell it. If you buy a house that's far from your job, don't complain about the commute. It gets hot and humid in the summer, so don't complain about that either. And for god's sake, don't tell us how much Houston sucks compared to wherever you came from -- we'd really wish you'd just go back there if you hate here so much.

Thanks chemprof --- do we know how much income inequality Singapore has? (I've never looked it up.)

That said, I prefer a forced savings system to the credit system we have here. "Credit bubbles" strike me as unwise and dangerous.

re: housing bubbles --- I personally think there's no reason to worry about a 'bubble' in housing prices unless you've got a) lots of subprime loans repackaged as securities (i.e. lots of bad debt), and b) a deflation-biased central bank that will allow NGDP to crash.

As far as I can tell, Singapore has neither. I suspect that a housing 'bubble' --- 'bubble' in the sense that prices rise rapidly and then crash to the prior level just as rapidly --- has little chance of happening in Singapore. Prices can rise rapidly, but when they stop rising they won't crash to the starting point. They'll level off or drop a bit.